> Rather than dropping compatibility entirely, I've always wondered why no modern OS has gone the route of creating a "compatibility layer" that's actually a (very-tightly-sandboxed) VM containing a [stripped-down] older copy of the OS.

I think Raymond Chen discussed this on this blog at one point. The answer is that users want a single integrated environment for all their apps and not a bunch of isolated sandboxes. They want to drag and drop, copy and paste, share files, inter-application communication, etc. They also want a single look and feel.

The other reason is that creating a new platform from scratch is a good way to lose features and alienate developers. The core of Windows NT doesn't look anything like Windows 3.1 but for developers the API they present is similar enough to get them on board.